“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Devon Energy Corp. (NYSE: DVN)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 06/16/2017 |
|
|||
| End date: | 06/15/2022 | ||||
| Start price/share: | $31.76 | ||||
| End price/share: | $68.46 | ||||
| Starting shares: | 314.86 | ||||
| Ending shares: | 377.59 | ||||
| Dividends reinvested/share: | $5.69 | ||||
| Total return: | 158.50% | ||||
| Average annual return: | 20.92% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,851.79 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 20.92%. This would have turned a $10K investment made 5 years ago into $25,851.79 today (as of 06/15/2022). On a total return basis, that’s a result of 158.50% (something to think about: how might DVN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Devon Energy Corp. paid investors a total of $5.69/share in dividends over the 5 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of 5.08/share, we calculate that DVN has a current yield of approximately 7.42%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.08 against the original $31.76/share purchase price. This works out to a yield on cost of 23.36%.
More investment wisdom to ponder:
“The right time for a company to finance its growth is not when it needs capital, but rather when the market is most receptive to providing capital.” — Michael Milken
